Mathias Drehmann

Bank for International Settlements
Centralbahnplatz 2
CH-4002 Basel

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org

NBER Working Papers and Publications

April 2018Going With the Flows: New Borrowing, Debt Service and the Transmission of Credit Booms
with Mikael Juselius, Anton Korinek: w24549
Traditional economic models have had difficulty explaining the non-monotonic real effects of credit booms and, in particular, why they have predictable negative after-effects for up to a decade. We provide a systematic transmission mechanism by focusing on the flows of resources between borrowers and lenders, i.e. new borrowing and debt service. We construct the first cross-country dataset of these flows for a panel of household debt in 16 countries. We show that new borrowing increases economic activity but generates a pre-specified path of debt service that reduces future economic activity. The protracted response in debt service derives from two key analytic properties of credit booms: (i) new borrowing is auto-correlated and (ii) debt contracts are long term. We confirm these propertie...
March 2012Liquidity Risk, Cash Flow Constraints, and Systemic Feedbacks
with Sujit Kapadia, John Elliott, Gabriel Sterne
in Quantifying Systemic Risk, Joseph G. Haubrich and Andrew W. Lo, editors
This chapter develops a quantitative framework which shows how shocks to fundamentals may interact with funding liquidity risk and potentially generate contagion that can spread across the financial system. First, it introduces a "danger zone" approach to model how shocks affect individual banks' funding liquidity risk. Second, the chapter combines the danger zone approach with simple behavioral reactions to assess how liquidity crises can spread through the system. Last, using the RAMSI (Risk Assessment Model for Systemic Institutions) stress-testing model, it generates illustrative distributions for bank profitability to show how funding liquidity risk and associated contagion may exacerbate overall systemic risk and amplify distress during financial crises.
December 2011Comment on "How to Calculate Systemic Risk Surcharges"
in Quantifying Systemic Risk, Joseph G. Haubrich and Andrew W. Lo, editors
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